Risks for Irish economy recede a little

The relief rally in equity markets following President Trump’s decision to delay ‘reciprocal’ tariffs for 90-days has proven short-lived. Yesterday, both the S&P 500 (-3.5%) and Nasdaq(4.3%) fell back sharply as investors refocused on the substantial US tariffs that remain in place and the potential for US/China trade tensions to escalate. This morning, China has retaliated, imposing 125% tariffs on US imports. Signs of stress in the US Treasury market remain a concern with 10-year yields at 4.39% this morning, following speculation Japan and China may have sold some of their holdings and accompanied by downward pressure on the dollar.

For all that, the risks for the Irish economy appear to have receded a little. Exporters to the US now face a smaller 10% tariff. Crucially, the exemption for pharmaceuticals remains in place, so circa 75% of Irish goods exports to the US will not be subject to tariffs. That the EU and US now look set to negotiate hopefully means an escalation of trade tensions, with measures targeting the key pharmaceutical and ICT sectors, is less likely.

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Bank of Ireland Economics Weekly 11th April 2025